Wednesday, May 18, 2011


Daily Post Column May 16th 2011

In an interview with the BBC’s Andrew Marr last year, the First Minister suggested that we do not have enough businesses in Wales and that “we have to do more to unleash the entrepreneurial spirit".

Indeed, in other media interviews, he again emphasised this point stating, for example, that “it’s sometimes said that the public sector in Wales is too large. I disagree; the public sector appears large because the private sector is too small.”

Given that there is now a focus on delivery of new private sector jobs, this begs the question over exactly what has happened to employment within the private and public sectors during the term of the last Assembly Government?

Official statistics shows that during the first three years of the last Labour-led administration, private sector employment in Wales reduced by 34,000, a fall of 4% as compared to June 2007. The biggest decreases in business employment were to be found in Blaenau Gwent (-19%), Torfaen (-14%) and Conwy (-11%), all local authorities within the poorest areas of Wales.

By contrast, public sector employment increased during the same period by 11,000 (or 3 per cent). Indeed, nearly a third of all those employed in Wales are currently to be found in the public sector, far higher than most other regions of the UK. The counties with the highest proportion of public sector workers are Ceredigion (36%), Isle of Anglesey (36%) and Cardiff (35%)

So what we find is that the Welsh public sector has continued to grow under the last Assembly Government whilst the Welsh private sector has declined. This is not an isolated trend and if we look at the statistics available for the period 2001-2010, then we see that the private sector in Wales has been declining in relative importance, at least in terms of employment, since the First Assembly Government.

In fact, during the last decade, the actual number of those employed in the public sector in Wales has increased by 67,000. In contrast, the number employed in the private sector has declined by 12,400.

The First Minister may be correct in saying that the private sector in Wales is too small but, as the statistics above show, there has been little success by successive Labour-led governments in Wales in addressing this issue, despite having billions of pounds of European funding available to support the business community.

From the statements made during the last few weeks of campaigning, we can only assume that Labour politicians in Wales do not want to cut any public sector jobs. However, in order to achieve the balance of private to public sector employment last seen in 2001 (i.e. ensuring that our private sector is not "too small"), then an additional 170,000 private sector jobs would need to be created over the term of the next Assembly to achieve this.

The question, of course, whether the new Labour Administration in Wales will go any way towards this target. Certainly, their manifesto argued that “much of the economic base of Wales is founded on large companies and they are vital to many parts of Wales”.

Yet, the evidence clearly shows that large firms created less than a third of all new private sector jobs during the last decade, with the vast majority of created by small businesses.

Certainly, if the Labour Party does not change its focus away from supporting large companies to backing small firms and, to quote Carwyn Jones, “unleashing the entrepreneurial spirit”, then the fourth Assembly Government will fail to make any serious inroads into creating new jobs in the private sector and ensuring Wales becomes a more prosperous nation.